I guess what I really need to know is do 'The Hobbit' rules replace the older LOTR rules or do I need both to play? I understand that the source books are like codex books and will need the one for the race I want to play.

The Hobbit rule book replaces the old Lord of the Ring One Rulebook. The source books are still valid and they contain the profiles for all the Lord of Rings models. You can mix and match between them and the profiles found in the Hobbit sourcebooks. Majority of the Hobbit profiles are available on the Black Library website.

Some of the sourcebooks are now out of print so can be tricky to get a hold off. The best place to ask for advice is "Great British Hobbit League" group on Facebook and I'd also recommend viewing some of the videos on the GBHL Youtube channel. The Facebook group is fairly active and the community is very friendly, there's over 20 tournaments a year up and down the country which are probably the most welcoming for new players that I've attended.